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« Newmont Mining | Main | Hecla Mining Company »
Saturday
Jul082006

Gold set to rally in September?

Is gold set for yet another rally in September? Over the past few years gold has always had a spectacular end of year upward rally, always starting around September.

In September of 2003, gold prices went from around $350 to approximately $425. A $75 move, a 20% move. In 2004 gold prices moved from $400 to $450 at the end of September. A $50 move representing a 12.5% increase in gold prices. Last years action will be explained in detail further on in this article. The graph below shows the September rallies of recent years.

Gold September Rally Pattern

Investors getting into position, anticipating a September rally, may cause a small upturn in gold and gold stocks before we enter September. So buy your gold or gold mining stocks before we enter that period.

However, last year gold began its move upwards literally as soon as we entered September and it continued to rise throughout the month. By the end of September gold prices had climbed nearly $40, from about $435 to a high of over $470. A $40 dollar move in a month doesn’t seem that dramatic now, when we have seen gold prices move $10, $20, and $30 even $40 in one day!
However one must bear in mind the gold price of a year ago. Gold was about $450 and so a $40 move is close to a 10% move. A 10% move on today’s prices would be a rise of $64 in a month. $64 in one month is about $16 a week or just over $3 a day. After September we could see gold at over $700. ($640+10%=$704)

September only signifies the beginning. After the September rally there should be a consolidation for about a month. Then gold will probably rise about 20% from the end of November until the end of January. Providing that gold prices stay above $700, a 20% move would force gold to test its all time high of $850 by the end of January.

Gold 2005 rally

So now that we have established where gold prices are going, the next point is how to take advantage of them. Of course the most obvious option is to buy gold bullion. By purchasing bullion or a gold ETF you will track gold price exactly as you shall do as well as the gold price. This is the safest way to trade gold. However to maximise the benefit and increase you leverage on the gold price, you would be better off buying gold mining stocks in the HUI.

The HUI tends to outperform gold as is shown in the chart below.

HUI Sept Rall Chart

I think that buying gold mining stocks is the best option. You may want to buy a mix of stocks and physical gold for added security though. Try to buy mid sized gold producing companies, as large companies like Barrick and Newmont are usually slow to follow gold. Bema Gold, Agnico-Eagle and Kinross are good stocks to be buying as well as others. Other gold stocks are mentioned in our gold mining category.

If anyone has any other suggestions of gold stocks, or comments on this article, please leave them below.

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Reader Comments (11)

I think gold will be over $800 in 08.

August 27, 2006 | Unregistered Commenterroyrogers61webtv.net

We think that $800 will be seen in early 2007.
If we are really cavalier about it, gold should be over $800 in January of 2007.

August 27, 2006 | Unregistered CommenterBob

I agree, $800 should be feasible by early 2007 as demand for gold generally increases as of September. If spot gold moves through $640 this week, the technical picture looks very good for the rest of the year.
However, I think silver & copper will rise even faster.

September 5, 2006 | Unregistered CommenterJoey

We also expect silver and copper to do well, however when the chattering classes get going we think that gold will be the topic of conversation. Have you looked at our sister sites?
www.silver-prices.net
www.uranium-stocks.net
they might give you a chuckle!

September 5, 2006 | Unregistered CommenterBob

The $640 indeed appeared to be a difficult hurdle as this is the line that connects the previous tops. There is some potential for a downward move to $607 so that should be the first target now. For now, the picture remains unchanged and gold continues to move sideways.

September 7, 2006 | Unregistered CommenterJoey

The first day back after Labour Day saw the enthusiasm for gold running a little ahead of itself and today it is normalising. Can't argue with your chart analysis, however we are in the middle of the Hard Assets Conference in Las Vagas so may be investors are waiting to see what hot stocks will emerge from that. We don't see gold going all the way to $607 due to the number of pent up buyers who are on the sidelines constantly being advised to buy on dips. Any significant dip will bring them out in force.

September 7, 2006 | Unregistered CommenterBob

With gold trading in London this morning at $611 it looks like we might hit the $607 level that Joey predicted. It just goes to show that we can all benefit from our readerships comments.

So those of you who have a few insights on gold please send them in, they are valuable no matter what your take on the situation may be.

September 8, 2006 | Unregistered CommenterBob

Thanks. Silver also moves back to the bottom of the upward trend channel which means that it could move down to 12, which might prove to be a good time to buy.

Meanwhile I've transferred some money to my broker so that I can start buying some mines again next week. Unless gold support at around 600 is broken, it looks like we have a new bullwave ahead of us! :-)

September 8, 2006 | Unregistered CommenterJoey

Joey, If you can find the time we would be pleased to post your views on silver on our silver site, its www.silver-prices.net

September 8, 2006 | Unregistered CommenterBob

September has come and gone but gold didn't do anything. Yes, it was up but then it went back down. I hope it does better in October.

Gemstocks

September 29, 2006 | Unregistered CommenterGemstocks

Agreed. We had hoped for a better performance than the one gold put in. Gold prices indeed went sideways for the month of September and now appears to be consolidating at current levels. Its always difficult to gage the short term moves as we found out with a spread bet that toally back fired on us. However, from an investment standpoint we are holding and buying when opportune moments present themselves and the cash position allows.

October 3, 2006 | Unregistered CommenterBob

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